Credit - Pre-Bankruptcy Tips, Part 4
By Nate Perrott
DO: Choose Your Filing Date Wisely
Another factor that goes into the timing of filing of a bankruptcy concerns your property. The day of the filing is like a picture being taken-it shows all your debts and all your assets as of that day. For example, you probably put down in your paperwork what you might have in a checking account. Obviously, money goes in the account and money flows out of the account. If you can, you might want to choose as your filing day a time when there's not as much money, for example, right after the rent has been paid.
DON'T: Hide Assets
Some people want to go too far with this and actually hide their assets. They take all the money out of their bank accounts before they file and stick it under the mattress or give it to their brother to hold for them.
Neither scenario will work. Either way, the money is still their property. They still have to list it on their petition, but under the "cash" heading instead of the "checking account" heading. And if they gave the cash to a brother, they'd also have to mention him as the person in possession of the property.
DO: Carefully Consider How You'd Justify Selling Assets Before Filing
Other people want to sell off their property right before filing. This can be appropriate, but you should be careful. It might make sense to liquidate some property that wouldn't be protected under your state laws. You could sell something and then use the money to catch up on your basic expenses and pay your bankruptcy attorney. You could also use the proceeds to pay a debt that wouldn't be discharged anyway, such as recent taxes or child support. In that situation, you'd be doing yourself what a bankruptcy trustee would do anyway.
Let me explain. If you did have property for the trustee to take, he or she would sell it and then use the money to pay your creditors, starting with the priority creditors. In effect, you'd be doing this on your own, selling something that can't be protected and giving the money to a debt that can't be discharged.
You'd still have to tell the court about this: first that you sold something and second that you paid someone. But the court would be unlikely to disturb a transaction that has the same result as if the court had taken care of it. You have to make sure that you can justify the circumstances.
For example, if you sold your car to that helpful brother of yours for ten bucks, the trustee would raise an eyebrow. You can't take less than full value for something to keep the money away from your creditors.
A certain amount of pre-bankruptcy planning is allowed. But it's hard to say exactly how much would be allowed in your case. Courts have interpreted this in different ways. You'll need to talk to a lawyer in your area to find out what is acceptable in your jurisdiction.
The main rule is to disclose, disclose, disclose. First tell your lawyer everything about your case and get some guidance on what you should do. Then, make sure that everything is listed somewhere on your petition when you file. The most trouble you can get into with a bankruptcy court is by hiding something.
DO: Get Credit Counseling
It's now required anyway. So you may as well get it over with. There can be a long wait to get an appointment to see a counselor. You don't want to be in the position of being ready to file and unable to do so because you haven't taken care of this. There is a way to file first and then get the counseling. But you'd have to show special circumstances. Again, you don't want to do anything to draw attention to yourself in bankruptcy.
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Page updated 9/11/2014 Thursday 9/11/2014